KANSAS CITY — Refined beet and cane sugar prices were raised to 48c a lb f.o.b. early Christmas week, topping a brief spurt to 45c in August 2008 and surpassing quoted prices of 45c in the aftermath of Hurricane Katrina in late 2005. Prices rose mainly on global supply concerns going into calendar 2010.

Domestic raw sugar futures (No. 16) and world sugar futures (No. 11) traded in New York, and white sugar futures traded in London, maintained or set record highs several times in 2009 on physical sugar supply concerns as well as on speculative buying by commodity funds. Last week white sugar futures hit an all-time high of $707.20 a tonne in London while world sugar futures climbed to a spot month 29-year high of 27.49c a lb in New York. Domestic raw futures in New York topped 35c a lb in the final week of the year.

Traders suggested the most recent climb in futures had more to do with speculative fund buying since the tight global sugar supply situation has been known for some time. But the longevity of the shortage has been surprising to some as global supply is expected to fall short of demand for two consecutive years. The International Sugar Organization forecast consumption would outstrip production by 11.3 million tonnes in 2008-09 and by 7.2 million tonnes in the current 2009-10 marketing year.

The major contributors to the shortage are India, the world’s second-largest producer and largest consumer, and Brazil, the largest producer and exporter, and to some extent Mexico, at least as far as the United States is concerned. Dry weather in India cut that nation’s 2008-09 sugar production by about 30% from prior levels, and although a rebound in outturn is forecast for 2009-10, production still is expected to be lacking and imports necessary. In Brazil it was a case of too much rain, which has hampered sugar cane harvest for weeks and reduced yields. Trade reports indicated production in Brazil’s major producing region was down about 25% from a year earlier in the first half of December.

In 2008-09 U.S. sugar users were “bailed out” by large shipments from Mexico, which may cross the border duty free under the North American Free Trade Agreement. But Mexico shipped so much sugar north last year, followed by a smaller-than-expected 2008-09 crop, that it left itself short and turned to the world market for about 550,000 tonnes of sugar in the second half of calendar 2009. Mexico’s 2009-10 crop is forecast by the U.S. Department of Agriculture at 5.4 million tonnes, raw value, but Mexico’s National Cane Sugar Growers’ Union in December forecast production at only 5.01 million tonnes, down from its earlier projection of 5.2 million but still up from its estimate of 5 million tonnes in 2008-09. The U.S.D.A. put 2008-09 Mexican sugar production at 5.26 million tonnes.

But the key part of Mexico’s situation that affects the United States is that 2009-10 exports were forecast at only 690,000 tonnes, just over half of the 1.27 million tonnes shipped in 2008-09. Last week traders indicated little if any Mexican sugar currently was offered in the United States while Mexico attempts to shore up its own stocks as the 2009-10 cane harvest gets into full swing and prices ease.

Concern about U.S. supply was expressed at a meeting between some sugar industry representatives and the U.S.D.A. in mid-December. Following the meeting erroneous reports indicated the U.S.D.A. was contacting exporters about potentially increasing shipments, highlighting the heightened sensitivity of at least some in the industry to the supply situation. Under law the U.S.D.A. cannot increase import levels unless an emergency of some type is declared.

Raw cane supply appears to be the major difference between the price rise four years ago and the current situation. The 2005 spike was the result of lost capacity as two refineries in the Gulf were damaged by Hurricane Katrina. Cane supplies were adequate but there wasn’t enough domestic cane refining capacity to meet demand. It was largely a U.S. problem. After peaking in September 2005, prices declined about 30% over the next year and eventually bottomed near 25c, before the February 2008 Imperial Sugar Co. explosion in Georgia sent prices back up, again due to lost refining capacity. The Imperial plant has been rebuilt and is running again.

The current price rise in physical sugar appears to be largely driven by tight supplies of raw cane, with much more impact from international conditions than is “normal” for U.S. sugar, which has enjoyed relatively stable prices over the years because of the government’s sugar program that limited imports.

Since Hurricane Katrina in 2005 the United States has mostly been blessed with

lighter-than-expected hurricane seasons, at least as far as sugar is concerned. Although the current hurricane season is winding down, at least one trader stated, “I would hate to think what might happen (to sugar prices and supply) if we have another Katrina.”